Judge Tony Davis has authored an opinion which should be recommended reading for anyone litigating preference issues.   The opinion encompasses the court’s rulings on both summary judgment and trial on the merits and touches on both procedural and substantive issues.   Ciesla v. Harney Management Partners (In re KLN Steel Products Co.), No. 13-1013 (Bankr. W.D. Tex. 2/18/14).   The opinion can be found here.What HappenedKLN Steel Products made and sold furniture.   In February 2011, it hired Harney Partners to provide business consulting and restructuring services.   Then initial agreement provided for weekly invoices to be paid by wire transfer within three business days.    KLN was never quite able to meet Harney’s terms and the agreement was modified several times.  Nevertheless, Nevertheless, KLN paid its bills on a regular basis by wire transfer through most of the engagement.   However, this changed in September and October 2011 when KLN made one payment entirely by check and one partially by check and partially by wire transfer.Things got interesting during the month prior to bankruptcy.   Harney abruptly resigned the engagement on November 1, citing recent discoveries and potential improprieties.   The parties made up and signed a new engagement agreement a week later.    However, KLN apparently decided not to retain Harney for its bankruptcy proceeding and the parties proceeded to negotiate terms of final payment.   KLN’s attorney contended that Harney refused to release its papers without payment, while Harney denied this and asserted that the parties reached an arms-length agreement.   Regardless of the cause, Harney was paid $50,000.00 on the day of bankruptcy.   The Debtor filed a liquidating plan.   The Plan and Disclosure Statement proposed to retain “any and all” chapter 5 causes of action but also referred to a list of payments on a schedule.   Adding to the confusion, the disclosure statement referred to an exhibit that was not attached. When the liquidating trustee filed suit against Harney, he filed a bare bones complaint asserting that he wished to recover “at least $168,594.85” in transfers.   This was the amount of 90 payments received by Harney without counting the day of bankruptcy transfer.   The complaint did not contain a list of the transfers to be avoided.Harney filed a motion for summary judgment.   The Court ruled that about half the transfers received during the preference period were subject to the ordinary course defense.   At the hearing, Harney pointed out that the trustee had not specifically pled for recovery of the $50,000 day of bankruptcy payment.    Nevertheless, the trustee did not seek to amend his complaint.   However, both parties listed the payment as an issue to be decided in their pre-trial orders.The case proceeded to trial with regard to four specific transfers:A transfer of $23,351.26 by check on October 4, 2011A transfer of $12,142.93 by check on October 18, 2011A wire transfer of $7,500.00 on October 18, 2011A transfer of $50,000.00 on November 22, 2011.How the Court RuledThe Court ultimately ruled that all of the disputed payments were not made in the ordinary course of business but that Harney was entitled to a new value defense for $2,280.00 for a net recovery of $90,714.19.   However, to get there, the Court had to wade through a procedural maze, including Stern v. Marshall, standing and proper pleadings.    Stern v. MarshallThe Court should be commended for its candid approach to Stern v. Marshall.   Judge Davis noted that Harney had not filed a proof of claim and that the Fifth Circuit had negated consent as a solution to the authority question.    As a result, two easy avenues for resolution were not available to the court.   Instead, the Court simply noted that in the face of compelling arguments for both sides that it would follow its statutory authority to enter a final judgment and that the District Court could treat its ruling as proposed findings of fact and conclusions of law if it was wrong.Judge Davis wrote:So then: The creditor not having filed a proof of claim, and the parties’ consent being unavailing, can the Court issue a final judgment in this avoidance action? Since Stern, courts have been divided on whether bankruptcy courts can enter final decisions in preference actions under such conditions. (citation omitted). The arguments for and against are sound.   (citation omitted).   The issue appears finely balanced. It is not decisively resolvable without further guidance from the Fifth Circuit or the Supreme Court. Because there is no clear precedent altering the status quo in this respect, the Court will adhere to the pre-Stern practice of issuing its ruling on this core matter as a final judgment, as Congress permitted under 28 U.S.C. § 157(b)(2)(F). If the District Court concludes that this course of action was in error, and that this Court lacks constitutional authority, the “final judgment” can be construed as “proposed findings of fact and conclusions of law,” with a final judgment to be entered by the district court. See Order of Reference of Bankruptcy Cases and Proceedings at 1-2 (W.D. Tex. Oct. 4, 2013).  Opinion, pp. 3-4.   I give Judge Davis credit for judicial humility.   Rather than engaging in legal gymnastics, he simply acknowledged that there was not a clear answer and ruled as best he could.StandingUnder Matter of Texas Wyoming Drilling, Inc., 647 F.3d 547 (5th Cir. 2011), a plan must contain “specific and unequivocal” language reserving claims in order for the post-confirmation debtor to have standing to pursue them.   Here, the plan proposed to retain any and all chapter 5 causes of action, which should have been good enough.   However, the plan went on to refer to the payments listed on an attached schedule.   The attached schedule did not include the day of bankruptcy payment.    The Disclosure Statement stated that the payments to be recovered included those on the attached list but failed to attach the list.So, which controlled:  the general statement or the specific listing?   Judge Davis held that the purpose of the specific and unequivocal requirement was to place creditors on notice.   Harney knew that they were subject to being sued for some payments.   As sophisticated restructuring consultants, they should have known that receipt of a payment on the day of bankruptcy would paint a target on them.   As a result, the requirement was met.   The Court stated:On this close issue, however, in the Court’s judgment, the best reading of the Plan and Disclosure Statement and their attachments is that KLN wished to preserve avoidance actions very generally. By listing some—even if not all—payments to Harney, KLN gave ample notice that payments to Harney might be the subjects of attempted recovery. What was included was sufficient to put Harney (and any other party in interest) on notice that Plaintiff might pursue not only the specific listed payments but also the $50,000 day-of-bankruptcy payment—a payment that Harney was well aware of, even if KLN omitted it. Also, a sophisticated restructuring consultant such as Harney would be well aware that this day-of-bankruptcy payment was certain to be a likely contestant for avoidance, more so than many of the payments that were listed. In fact, it is the unusual, last-second nature of this payment that likely caused it to be omitted from the list of the more typical payments made in the Preference Period. The opposite ruling here would have the effect of discouraging the filing of such lists in favor of the more general retention language approved of in Texas Wyoming. It seems preferable to encourage more rather than less disclosure, even if the more detailed disclosure includes the occasional, relatively minor error.Opinion, p. 22.    Judge Davis’s analysis is instructive.   Rather than taking a formalistic approach, he looked at the practical realities.   This is in keeping with the spirit of the Federal Rules of Civil Procedure which focus on notice more than the use of magic words.PleadingsThe Court reached the same result on adequacy of pleadings but for much different reasons.   The Complaint said that Plaintiff sought to recover all payments within 90 days, including “the total of at least $168,594.85.”   Mathematically, the total of $168,594.85 did not include the $50,000 day of bankruptcy payment.  As a result, the Defendant contended that this payment was not included within the Complaint.   The Court found that the pleading was “so bare-bones and open-ended that it hardly can be said to omit or include the $50,000.”   Opinion, p. 24.  The Court noted that the Complaint could have been subject to a valid motion under Rule 12(b)(6) but that one was not filed. Although Harney never filed a motion to dismiss the complaint, there might have been a basis for such a dismissal. Courts have required more detail from preference complaints than contained in Plaintiff’s Complaint. In most cases, it appears at a minimum that complaints should include basic details of the alleged preference payments, an explanation of the relationship between the parties, and basic facts to support the other required elements—in other words, at least “sufficient factual matter, accepted as true, to ‘state a claim that is plausible on its face.’”   (citation omitted).   The Complaint here can hardly be said to have met that basic standard.Opinion, p. 24.   Even though the complaint was clearly inadequate, the Court found that it did not bar recovery of the disputed payment.    The Court found that trial by consent was present where both parties briefed the day of bankruptcy payment in their summary judgment papers and included it within their pre-trial orders.    The Court explained that the pre-trial order “supersedes all pleadings and governs the issue and evidence to be presented at trial.”     Opinion, p. 25. Additionally, the Court found that “the Trial record shows that Harney put on extensive and well-prepared evidence concerning the day-of-bankruptcy payments, and hotly contested the story Plaintiff sought to tell about those payments.  In other words, Harney’s trial conduct supports the position in Harney’s Pre-Trial Order, to the effect that Harney consented to trying the day-of-bankruptcy payment alongside the other challenged payments.”  Opinion, p. 26.  This is probably one of the few times in litigation when a party lost an argument due to being too well-prepared.   Once again, the Court took a functional approach despite the Plaintiff’s sloppiness.  Ordinary Course DefenseThe Court spent a lot of time on the ordinary course defense.   This is good because preference issues are not often litigated which makes it hard to find current precedents.    The defense has two parts.   First, the debt must be incurred in the ordinary course of business of the debtor and the transferee.   Second, the payment must be made either in the ordinary course of business between the parties (the “subjective test”) or “made according to ordinary business terms” (the “objective test”).   Prior to BAPCPA, there was an “and” between the subjective test and the objective test.   Now there is an “or” meaning that either one will suffice.The Trustee challenged the incurred in the ordinary course of business element on the basis that the Debtor was in the business of making furniture rather than hiring restructuring consultants.   The Court noted that this is not quite what Congress meant.   It wrote that:To meet the “debt incurred” element of this affirmative defense, all that is required is that a debt be incurred in a “subjectively” ordinary course of business, just as a transfer is protected if it is made in the “subjectively” ordinary course of business. In both instances, the test is whether there is a discernable pattern in the parties’ “subjective” relationship, within which pattern the challenged debts and transfers are “ordinary.” (citations omitted).    Plaintiff attempts to shoehorn a different, more stringent standard into this phrase in the “debt incurred” context than the meaning it holds in the “payment made” context. That effort must fail, as a plain matter of textual interpretation. Thus, applying that legal conclusion to the facts of this case, if the Preference Period debts were incurred consistently with how the pre-Preference Period debts were incurred, they pass the “debt incurred” portion of the test.Opinion, pp. 12-13.  The Court also noted the practical concerns raised by the Plaintiff’s argument, noting that if restricting consultants were punished for doing business with a debtor prior to bankruptcy, they would not do business and the chances of the debtor avoiding bankruptcy would plunge to close to zero.    The Defendant did not present evidence on the Objective Test.   The Court noted in a footnote that getting paid on the day of bankruptcy could be in the ordinary course of business for those in the restructuring industry but that the evidence was not presented.In evaluating the Subjective Test, the Court identified several factors as helpful.The “subjective prong” centers upon “whether the transactions between the debtor and the creditor before and during the ninety-day period are consistent.’”   (citation omitted). In analyzing this prong, “courts have come to a rough consensus as to what factors are most important. Typically, courts look to the length of time the parties were engaged in the transaction in issue, whether the amount or form of tender differed from past practices, whether the creditor engaged in any unusual collection activity, and the circumstances under which the payment was made (i.e. whether the creditor took advantage of the debtor’s weak financial condition).” (citation omitted).  Opinion, p. 9.  The Court found that it was significant that no payments were made by check, either before or during the preference period, other than the ones on October 4 and October 18.   Judge Davis explained that while the difference in payment was not enough to render the payments outside the ordinary course, the reason for the difference, namely that the Debtor was short on cash, was important.  The Court received conflicting testimony with regard to the day of bankruptcy payment.   Greg Milligan, testifying for Harney Partners, stated that the firm did not require payment as a condition of turning over its reports, while Patricia Tomasco, testifying for the trustee, insisted upon this condition.   The Court found that “The emails were more consistent with Mr. Milligan’s story, but Ms. Tomasco, counsel for KLN, gave specific and credible testimony to the contrary.”   Opinion, pp. 29-30.   The Court ultimately decided that it need not resolve the conflict in testimony because it could rest its ruling on other grounds.   The Court found that the day of bankruptcy payment was not subjectively in the ordinary course of business.(I)t bears mentioning that there is nothing improper about a professional seeking payment for services, including on the eve of bankruptcy (although of course the professional may risk avoidance under some conditions), and what appears to have happened here (as far as can be drawn out of the limited available evidence) does not rise to the level of impropriety or coercion, even if it might be sufficient to depart from an “ordinary course.”Nonetheless, Harney’s defense is unsuccesful. Clearly, the timing of this last payment was dictated by the fact that KLN was filing bankruptcy the next day. Unlike most or all of the prior payments, the payment was made quite soon after the latest invoice (which was dated November 19), was made in payment of two separate invoices, and was significantly higher than any other single payment, whether before or during the Preference Period.  Each of these facts weighs against ordinariness. Moreover, there is no pattern of payments established under the renewed retention of November 8 against which to measure the ordinariness of this payment.  The November 8 retention letter could have provided for an eve-of-bankruptcy pay arrangement, but did not. While the terms of the governing engagement letter do not necessarily delineate the exact bounds of ordinariness, they are probative, particularly when there was not yet a pattern of payments under this renewed engagement letter, against which the eve-of-bankruptcy payment could be assessed. Finally, it again bears emphasizing that Harney had the burden. The Court finds that it failed to carry that burden.Opinion, p. 30.Final ThoughtsSeveral points come to mind from reading this opinion.  The first is that the opinion is a portrait of a judge trying to make the statutory scheme work notwithstanding the foibles of the Supreme Court or the lawyers.   Although the written opinion indicates that Harney Partners tried a good case, this was not sufficient to meet its burden of proof.    While we would like to think that cases depend upon superior advocacy, sometimes the facts just don’t cut your way.   Second, preference litigation is very fact-specific.   Several of the issues in this case turned on the fact that Harney Partners was a sophisticated restructuring consultant.    These issues might have turned out differently for a run of the mill trade creditor.   When trying your preference case, look for the facts that make your case different from the other hundred cases.   Finally, procedure matters. Defendants have the ability to require that Plaintiffs plead more than just a bare-bones complaint.   While failure to file a Rule 12(b)(6) motion probably did not change the result of this case, it was a tool that the Defendant could have used.   Additionally, parties should keep in mind that the pre-trial order supersedes the pleadings.   When there is a question over whether an issue has been properly raised, this dispute should be stated in the pre-trial order to avoid trial by consent.     Disclosure:  Greg Milligan of Harney Partners is a business friend who used to live in the same neighborhood as me.   I am also well acquainted with both of the attorneys who tried the case.   My goal in discussing the case is to look for the practice points and not to critique attorneys who I work with.   However, if anyone wants to discuss a case where I represented the non-prevailing side or just didn’t have time to get around to, I would be happy to accept a guest post.   My only condition is that it needs to come from a Texas bankruptcy lawyer.  I also welcome substantive comments on anything I have written.

   A debtor was unhappy with the Court's rulings that the mortgage was valid, and appealed the denial of his Rule 60 requests for reconsideration in Schmid v. Bank of Am., N.A., 13-CV-784-BBC, 2014 WL 670995 (W.D. Wis. Feb. 21, 2014).  The debtor alleged Bank of America did not hold the mortgage.  The lower court initially found that the objection to claim was withdrawn, and entered an order denying the objection without prejudice. When the Debtor filed an adversary asserting the same claims, the Court found that it was barred by the Rooker-Feldman doctrine.     The Debtor/Plaintiff has requested reconsideration of the ruling in favor of Bank of America based on Rule 60(b)(2), newly discovered evidence.  This was based on an allegation that she (the Debtor) did not discover that Freddie Mac had acquired her mortgage, and instructed the servicers of its collateral to conceal its identity until after the initial order of the Bankruptcy Court.   Rule 60(b)(2) allows a motion for relief from judgment on the grounds of “newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial [or amended judgment] under Rule 59(b).  The District Court ruled that ”[a] successful Rule 60(b)(2) motion has five prerequisites: (1) the evidence must have been discovered after the entry of judgment; (2) due diligence on the part of the movant to discover the new evidence has been shown or may be inferred; (3) the evidence is not merely cumulative or impeaching; (4) the evidence is material; and (5) the evidence is such that a new trial would probably produce a new result. Jones v. Lincoln Electric Co., 188 F.3d 709, 732 (7th Cir.1999).    The Bankruptcy Court found that the Debtor did not show she could not have discovered this evidence before the initial order was entered, and her failure to find it constituted a lack of due diligence.  Further, the fact that the state court had entered a judgment prior to the filing of the bankruptcy would preclude the Debtor's argument.  The District Court affirmed, finding that a reasonable person could agree that the Debtor did not perform due diligence and that the evidence was not material. The Debtor also requested reconsideration under Rule 60(b)(3). Rule 60(b)(3) permits relief from a judgment for “fraud ... misrepresentation, or misconduct by an opposing party.  In order to qualify for this relief, the party  is required to prove that (1) she had a meritorious claim; and (2) because of fraud, misrepresentation, or misconduct of the adverse party, she was prevented from fully and fairly presenting her case. Lonsdorf v. Seefeldt, 47 F.3d 893, 897 (7th Cir.1995).  The Bankruptcy Court found that the Debtor did not rebut the prima facie evidence of the validity of the Bank of America claim, or dispute that she signed the note and mortgage, and lacked standing the challenge the endorsement.  She also had not made a plausible showing of fraud by Bank of America, or that any fraud prevented her from presenting her case.  The District Court found that the lower court has not abused its discretion in denying the Rule 60(b)(3) motion.  Finally, the appellate court denied the request for reconsideration based on alleged lack of due process, allegedly in denying the Debtor an evidentiary hearing.    “Due process requires notice ‘reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.’ “ Espinosa, 559 U.S. at 272 (citing Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)). Actual notice is not required. Dusenbery v. United States, 534 U.S. 161, 170 (2002).  The Bankruptcy Court found that Debtor's attorney had appeared at numerous hearings, the Debtor had been granted a number of extensions, and that the Debtor did not object at a telephone conference where the Court ruled an evidentiary hearing would be held only if the adversary were not dismissed.  Again, the District Court found that the ruling was not an abuse of discretion.  

The ultimate goal of your chapter 7 or 13 bankruptcy is receiving a discharge from the court. In a chapter 7 bankruptcy this occurs after your paperwork is filed, the meeting of creditors is held, the time period has passed for any creditors to object to a discharge, and you have completed your required financial education course. The post Bankrupcty Discharge appeared first on Tucson Bankruptcy Attorney.

When considering filing for bankruptcy there are a number of factors to evaluate. Many of our clients are facing serious financial and emotional losses, perhaps even including foreclosure of a home or repossession of a vehicle. We can help with these issues and many others. When you file a bankruptcy petition creditors are not permitted to keep contacting you for payment. Now, there are some exceptions; for example, if you want to keep your house you may find it easiest to discuss small matters (like a payment address or a change in escrow accounts) directly with your lender. If you would like to do this we can discuss this and fill out the proper paperwork to allow that type of communication.Though there are exceptions, the general rule is that your creditors cannot continue to contact you after you file for bankruptcy. This protection is called the "automatic stay". However, you should know that this protection has limitations. While the creditor cannot try to obtain payment from you or contact you regarding payment, the creditor does not have to continue to do business with you in the future. In most cases credit card companies will close accounts of cardholders that file for bankruptcy.Where this can be particularly troublesome is when your doctor or hospital is listed as a creditor. We have many clients, both with and without medical insurance, that owe their doctor or hospital money. This can range from a small copay to thousands of dollars for medical care. Once you file bankruptcy your doctor or hospital does not have to continue to provide you with services. Of course, there are exceptions if you require emergency care as medical professionals are required to provide anyone needing emergency care with services, regardless of ability to pay or other considerations. However, the provider would only have to stabilize you and then could refer you to another provider.We know this sounds a bit scary, but there are various options available. If the amount owed is very small, and you can afford it, you may be able to pay the amount prior to filing for bankruptcy and not be required to list your doctor or provider as a creditor. Please note, that it is absolutely imperative that you speak with us before doing this, as certain types and amounts of payments prior to a bankruptcy can be considered fraudulent and will complicate your bankruptcy. If payment is not an option you may be able to contact your provider and explain the situation to find out their policy in advance. You may also choose to voluntarily repay the debt. The doctor cannot ask for that, or require it, but in some cases doctors have accepted the payments and continued treatment. Finally, if these solutions will not work, we can talk about different bankruptcy options that involve repayment of creditors.If you have questions about this, or any other matter, please contact your St. Louis Bankruptcy Attorney today!

What You Should Know About Bankruptcy FraudBankruptcy fraud is a serious federal offense that can cost you more than just your personal possessions – it can cost your freedom. There are various ways debtors try to deceive the court from learning more about personal finances. Many consumers may not realize that doing one act alone, such as concealing an asset, can have you facing charges for fraud.Consider the following points:There are 4 forms of bankruptcy fraud. These include concealment of assets, false or incomplete filed documents, multiple filings under false names, and bribing court appointed trustees.Roughly 70 percent of fraud cases involve concealing assets. This can be done in different ways but a common form includes transferring titles to family members or friends.Filing bankruptcy in multiple states is also fraud, but debtors that do this may use real or false personal information when filing forms. Some do this to buy more time to conceal assets.Another form of bankruptcy fraud commonly involves unauthorized agencies or petition mills. These agencies act as a consulting service to help cash-strapped consumers from being foreclosed, evicted, or have further legal action taken against them. Such agencies claim to file bankruptcy for you and then they pull out and disappear from the case; leaving debtors out of money while charging exorbitant fees.As a federal offense, bankruptcy fraud is punishable by up to 5 years in prison with a $250,000 fine in some cases. Probation is another option depending on the outcome, but you may end up being responsible for debt obligations that were intended for discharge or elimination. -->

Divorce is complicated. Bankruptcy is complicated.  Divorce and bankruptcy together are really complicated. The Bankruptcy Code is a series of trade-offs. The interests of creditors are balanced with those of the Debtors who need relief.  Some debts can’t be wiped out in bankruptcy.  Rights arising from divorce are treated with great respect in bankruptcy. Here are some debts which can’t be3 discharged in bankruptcy. recent tax debt debts where the debtor lied or committed fraud student loans debts arising from divorce – domestic support obligations in particular debts arising from intentional wrongful acts – like assault and battery debts arising from justifiable reliance on a false financial statement debts arising from embezzlement or defalcation. The Bankruptcy Code is sometimes much more complicated in practice than it is as written. An example of this is found at sections 523(a)(5) and (a)(15) both of which deal with debts arising from dissolution of marriage or divorce.. Bankruptcy Code section 523(a)(5) is straightforward: Not dischargeable is any debt for a “domestic support obligation.” So child support, alimony, and so forth are not dischargeable in bankruptcy. 523(a)(15) specifies that not dischargeable is any debt “to a spouse, former spouse, or child of the debtor” that isn’t child support, but that is made “in the course of a divorce or separation or in connection with a separation agreement, divorce decree, or other order of a court of record…” When representing a debtor in bankruptcy, an attorney needs to review the divorce decree. But the analysis doesn’t stop there. Because 523(a)(15) has been interpreted more broadly than it reads. What if, for example, a divorce decree specifies that one spouse will be 100% responsible for a joint credit card? That wouldn’t be a debt to the (ex-)spouse. It’s a debt to the credit card issuer. It seems like it shouldn’t be 523(a)(15) debt – but it is. Imagine: A family court Judge has already found one partner responsible for payment of the debt. If that partner doesn’t pay – if that partner is discharged in bankruptcy – the debt doesn’t just evaporate. The other partner retains the obligation to pay. For that reason, even though this hypothetical obligation to pay is not a debt “for a domestic support obligation,” and it’s not “to” the spouse, former spouse, or child, it’s still a 523(a)(15) debt. But it’s not, interestingly enough, 523(a)(5) debt. Not that it makes sense; It’s complicated. There are options. A chapter 13 discharge may, in fact, discharge 523(a)(15) debt, just like it can discharge parking tickets (523(a)(7)) that a chapter 7 can’t discharge. A lawyer needs to be both sophisticated and ready for a swashbuckling argument with the other partner’s attorney. Settlement is possible. The point is, in this and so many other ways, the Code has nuances and a client filing for bankruptcy needs a lawyer who can explain them, and can make them work best for the client’s needs.

If you are filing for bankruptcy, either under chapter 7 or chapter 13, your income matters.  Why?  People who make more than the median income – the income more than 1/2 of the people make – are presumed to be abusing the system if they file a bankruptcy under chapter 7.  For an individual, that’s around $40,000 and for a family of 4 that’s around $80,000. It’s better for most people to file chapter 7 than chapter 13 because in chapter 7, you are done with your bankruptcy in 4 months.  In chapter 13, you pay more fees and you make monthly payments to a chapter 13 trustee toward payment of your debts for 5 years.  This can be a good deal if you are trying to save property or catch up with mortgage arrears. It’s not such a good deal if you have a very little non-exempt property which you might lose in a chapter 7. When you make more than the median income, we have to figure out if you overcome the presumption of abuse. We do that by analyzing your income and expenses under the government’s Means Test as adopted by the Bankruptcy Code. Many of our clients are married.  Frequently, one person in a marriage has debt and needs to file for bankruptcy but the other does not. Then what happens? It’s not all that simple. We have to figure out your projected disposable income.  To figure this out, we need to know not only what you make and what your expenses are, we also need to know what your spouse makes and what your spouse’s expenses are. That’s because anything your spouse makes beyond your spouse’s own separate expenses are deemed to be available to you as disposable income to allow you to pay some of your debts.  This additional disposable income might make a difference in determining (a) whether you are eligible to file a case under chapter 7 or (b) how much you’ll have to pay as a monthly payment if you have to file a case under chapter 13. It might seem unfair that your spouse’s income must be considered if you are filing a bankruptcy case and your spouse is not.  But Congress has spoken  and we must help you obey the rules. The good news is that if you file a bankruptcy case and your spouse does not, your bankruptcy case has no adverse impact on your spouse’s personal credit. It’s complicated when one spouse files for bankruptcy and the other does not.  Lakelaw’s board certified bankruptcy attorneys have great experience with complex cases like yours.  Count on us to help you when you have tricky bankruptcy questions.   Call Lakelaw in Chicago or Waukegan at 847 249 9100 or in Milwaukee or Kenosha at 262 694 7300.

Follow Advice For A Smooth Chapter 7 If you want a chapter 7 bankruptcy case to go smoothly, then you want to follow all of the advice of your attorney. This advice starts with being open and honest regarding your financial situation. Your attorney is going to want to know everything that you have in+ Read MoreThe post How To Have A Smooth Chapter 7 Bankruptcy? appeared first on David M. Siegel.

Our client needs to file for bankruptcy but can’t file her case until August.  Why?  She wants to discharge income taxes and must wait until they have been due long enough. In the meantime, creditors were suing her and getting judgments. Once a creditor in Illinois gets a judgment against you, it can take steps to collect the judgment.  Most frequently creditors will try to collect their judgment by using a citation to discover assets.  The creditor can direct the citation to discover assets to the debtor or to anybody else who the creditor thinks might have assets belonging to the debtor – like a bank or an employer for example. Most people facing judgments in Illinois don’t know that they can protect themselves with the same exemptions which they might use in bankruptcy. Sure, we can file a bankruptcy case to protect against a judgment. But not everyone can file a bankruptcy and it could be a problem for someone to file a bankruptcy right away.  Maybe it’s been less than 8 years since a prior bankruptcy.  And maybe we need to wait to let an important deadline pass.  There’s a 3 year waiting period from the last day to file a tax return for discharge of certain taxes.  There’s a 4 year waiting period from certain transfers which could be avoided as fraudulent transfers.  There’s a 1 year waiting period from payments of debts to friends family or relatives. In the meantime, we can claim exemptions for a judgment debtor to prevent a creditor from taking assets.  What did we protect for our client this week? We protected $2400 equity in her car using the automobile exemption We protected another $4000 equity in her car using the wild-card exemption We protected 85% of her wages using the wage exemption We protected 100% of the cash surrender value of her life insurance because it was for the benefit of her children We protected 100% of the money in her children’s bank accounts for which she was custodian because this was proceeds of social security, a public benefit. We protected 100% of the money in her IRA because this is fully exempt under Illinois law. These are just a few of the important assets which creditors can’t touch if they have a judgment against you. Click here for additional information about exemptions in Illinois and Wisconsin.  While our client will certainly have some challenges from now until the time that it is optimal for her to file her bankruptcy case, we at Lakelaw will continue to protect her outside of bankruptcy until we can get complete relief for her in bankruptcy. If you are facing judgments but can’t file bankruptcy today, call David Leibowitz at Lakelaw today at 847 249 9100.  We can intervene today to help you solve your immediate problems while we develop a lasting and permanent solution to your financial distress.  

For chapter 11 debtor's lawyers, Matter of Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998) is like the sword of Damocles--constantly hanging over counsel's head and threatening to deny compensation when a case goes south.   While 11 U.S.C. Sec. 330(a)(3) makes results one of several factors to consider in awarding compensation, Pro-Snax makes "identifiable, tangible and material" results a pre-requisite to getting paid.    While several Bankruptcy Judges have pushed back against Pro-Snax, there has not been a publi-shed decision from the circuit construing Pro-Snax since it came down.   However, that may change soon.My firm was on the receiving end of a Pro-Snax ruling (please don't tell anyone), which finally made it to the Fifth Circuit last week.    In oral argument, the Court indicated that this was not the only Pro-Snax case they were considering.   Here are some excerpts from the oral argument in No. 13-50075, Barron & Newburger, P.C. v. Texas Skyline Interests, Ltd., et al:Mr. Sather:   Since 1998 when a panel of this court decided the Pro-Snax case the lower courts have struggled with the meaning of Pro-Snax . . .Judge Owen:   So have we.Mr. Sather:  . . . a case that they have described as "difficult to apply" and "having clouded the issue."  Today the court has the opportunity to clarify whether the Pro-Snax court intended to modify Title 11 and in effect reverse Congress and intended to modify this Court's prior precedents on attorney's fees in bankruptcy or whether Pro-Snax can be harmonized with the statutory text and this court's prior precedents.   In case it's not obvious, we're taking the latter position.   We believe Pro-Snax can be harmonized with the other rulings from the Fifth Circuit as well as the statutory text.Judge Prado:  Our opinion could be the opinion that clarifies it for everyone? Mr. Sather:  There is another case pending before the court on the same issue that was argued in November.  Ironically, with Pro-Snax having been out for fifteen years, the two cases pending before the Court right now are, to what I can see, the first ones to say please tell us what the heck you were thinking when you decided that.    Judge Owen:  I've seen it four times this year at least, so why is it all of a sudden Pro-Snax is bubbling up in so many cases?Mr. Sather:  I think that when you get a bad ruling (against your own firm), there is a reluctance to appeal.   In this case, our firm was stubborn enough to bring it up.   But the strange thing is, Judge Gargotta, who heard the case said that in his five or six years on the bench, it was the first time the issue had come up.   So I think what happens is that the case is honored more in the breach than in the day to day operation of chapter 11 because most chapter 11 cases fail and you would expect therefore that most chapter 11 lawyers would have their fees denied.The take-away here is that the Fifth Circuit seems to definitely be thinking about Pro-Snax, which is a good thing.   The other thing is that it's really weird hearing your own voice on a recording.  The argument can be accessed on the Fifth Circuit's oral argument page.